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Median unit prices approaching median house prices

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Not sure if anyone has noticed but difference between Median House Prices and Median Unit prices is steadily narrowing in Adelaide. What does this mean and why do we care?

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The Median House price in Adelaide is now at $385,000 down 2.5% on last year whilst the Median Unit price is now at $325,000 down 2.26% down from last year.

Before you get all doom and gloom it is interesting to note that the average annual growth over the last ten years for Houses is 10.36% and 11.31% for units. This really is an exceptional return considering when most people talk about properties doubling in value every 10 years this only represents a growth of 7% annually.

So what does this mean for investors? Should they buy a House or a Unit.

There are pros and cons for both options however one thing to consider is the land appreciates and buildings depreciate. This being said if you are looking for the long term you may get better capital returns by investing in Houses with a greater land content whereas if you are looking to minimise your tax this may be best be achieved by Units where there is a greater building content.

My preference would be ignore the market and statistics and look at the deal. If it looks like a good deal then buy it.

Trying to pick the market based on what has happened in the past is a difficult game to play.


Lodging a development application

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When lodging an application for subdivision you first must lodge an application with the Development Assessment Commission (DAC). Once an application is lodged with DAC they will then send copies of the application to the Council

as well as all the relevant government agencies and authorities which provide utilities and services to the block ( e.g. SA Water, ETSA, Transport SA). The Council and relevant authorities will then determine what requirements they may have in respect to the application and forward their comments back to DAC for further clarification or amendments.

Once the Council and authorities have determined that the land division is appropriate Conditional Development Approval may be given subject to further conditions and requirements which must be satisfied.

At the satisfactory fulfilment of these additional conditions and requirements the Council will then advise DAC that it has no further objections to the issue of a certificate for the purpose of creating new titles for the development. Other relevant authorities will do the same once their requirements have also been met.

The Commission will then issue a Certificate of Approval which is lodged with the Registrar-General of the Lands Titles Office. The New Certificates can then be issued.

The time it takes from first application to the issuing of new titles will vary depending on the size and complexity of the development however standard subdivision from 1 into 2 blocks will usually take about 12 months to complete.


Major banks share under threat

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Australia's major banks are starting to see the effects of aggressive strategies from their competitors and it appears that they are beginning to have an impact.

In February this year the percentage of loans written by Australia's non-major banks was at 23.9% and all signs are that this will continue to move upward.

With the protection offered to the major banks as a result of the Deposit Garauntee during the GFC the major banks had a distinct advantage on its competitors. This resulted in a rush to the majors when times were difficult.

As funds have filtered into the market other lenders are now able to compete and in many cases offer significantly better deals than the majors.

As Mortgage Brokers are now making their clients aware of the great deals on offer by their they are seeing that they can make significant savings by switching lenders.

The removal of exit fees last year has made the option of switching much more appealing and has signaled to the majors that they have to lift their game or lose business.


Know your property's value

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Before considering whether to develop your property it is essential that you have an understanding of the current value of your property. This will allow you to compare any gains in value as a result of the development process and determine which options will maximise your returns.

There are a number of ways to determine the current value of your property, however the most common method is to compare your property to recent sales in your area and make any adjustments to value due to items included or not included in the comparison property.

Many homeowners may determine the value of their properties by looking at other properties available for sale in their area. However this method may not give the most accurate estimate as often the price that properties are marketed for do not necessarily represent the actual price that the property is sold for.

Many local real estate agents offer a no obligation free appraisal of the current value of your property. Agents will provide you with properties which have sold in your area, including the price it sold for and the number of days the property was on the market. This value can be then used as a suitable starting point prior to embarking on the development process.


Jack of all trades

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I am often asked why is it you offer so many services and dont just focus on one?

Although it appears that we offer

Investment Analysis

Finance

Planning Consulting

Building Designs

Depreciation Estimates

Builder Broker

Real Estate Sales

House & Land Packages

In actual fact in my eyes it is just property development.

In the world of property development if you miss just one of these items out it can turn a profitable development project in to a nightmare.

In the past i have seen the impact that can happen if the process isnt managed with a coordinated approach with the same goal in mind.

Too often the developer will deal with their Financier, Planner, Surveyor, Conveyancer and Real Estate Agent without a collective approach only to find out too late that these parties may not be acting with the same objectives or having all the pieces of the puzzle.

 

It is vital when considering developing a property that a clear coordinated strategy is adopted very early on before any money is spent. 

 

Unfortunately property development can be very unforgiving when poor choices are made early on and once that choice is made the project must continue on to the end regardless of whether the project is profitable or not.